By Helen Calder

Many people believe that when you work for yourself as a freelance writer you get a wealth of benefits from being your own boss. Picking your own working hours and effectively choosing your workload are undoubtedly perks of the job, but there are also major inconveniences when it comes to working for yourself – not least that you lose the luxury of having a payroll department to deal with your wages and tax contributions on your behalf. This becomes your responsibility and keeping track of your budget, ensuring you are receiving the correct payments and meeting all the legal criteria of running a business can be complicated, especially for beginners. Here are just a few of the things you should do in order to manage your finances effectively as a freelancer.

Costings

It is important to work out the pricing of your work effectively so that you don’t find that you’re over or under selling yourself. Base this on your experience and do a little research to see what those in a similar trade/position are charging in order to be competitive. Decide whether you will be charging an hourly rate or if you’ll charge per project. If you have been employed in a similar field before then think about your previous salary and hourly rate then use that as a starting point. Remember you can revamp your price list as your credentials grow.

Open a business account

Using a personal current account for business purposes will get messy. Open a business account for client payments and business expenses. It will be a lot easier to keep track of what is going in and what is coming out. The nature of modern e-banking means that you can transfer funds between your personal and business accounts easily but keeping them separate to begin with will be simpler and will also help enormously when it comes to identifying business expenses and calculating end of year reports. Often they come with additional extras such as business insurance too.

Taxes

Speaking of end of year reports, always remember to put savings away for your taxes. How you do this is up to you but many recommend that deducting the correct taxable percentage from every payment then putting it in a separate tax fund is the best way to avoid any nasty surprises. It might sound like a long winded, inconvenient way of doing business but it is much more inconvenient to receive a huge tax bill come year end if you are unprepared.

Good Bookkeeping

Bookkeeping is essential for freelancers. Primarily this is to help you provide accurate tax information but your books will also give you a good insight into your overall progress, enable you to make predictions on your annual income and help keep track of the amount of time a particular project took which may help you price another, similar job up in the future. They key information you should record for each project include the clients details, the nature of the project, the time it took, the payment due and when/how it was received, any business expenses and the relevant proof (i.e. receipts for equipment, parking tickets, mileage claims etc). Update your books regularly and record any expenses immediately before you forget about them.

Getting paid

The nature of freelancing can often be unpredictable in terms of your finances. On any given month your earnings could fluctuate depending on your workload. For this reason it is important that you are paid promptly for any work that you carry out and your conditions for payment are made clear with clients before you begin working for them. Sometimes a contact detailing the nature of the project along with the stipulated time frame for payment can make things clearer for both parties. Invoice when the project is complete and keep track of when your payment is due. If they still don’t pay then don’t be afraid to send warnings or seek legal advice when chasing the payment. Although it can often seem easier to just write it off (no pun intended) this is your livelihood so stand firm.

Speak to an accountant

If you still find yourself confused by the twists and turns of managing your finances, consider hiring an accountant. Many freelancers hand their financial issues over to an accountant when their workload takes off as they simply don’t have time to handle it. But even if you are just starting out, an accountant can help simplify things for you and explain what you’re required to do and how you should do it. They may also be able to recommend electronic programs and software packages to help you record your workload, time, payments and even generate invoices for you.

Helen Calder is a former health professional turned freelance writer. She had to give up her career in the health sector a few years back and turned to writing as a way to make a living. She now pens articles on health, well-being and creativity for a number of different sites and is well versed in the particulars of making a her own writing nook. Read more of her articles here: Curbing Your Anxiety, A Room Of One’s Own.

Citations

• 5 Reasons to Open a Business Checking Account
• Insuring Your Business
• Bookkeeping for Freelancers
• 5 Tips for Dealing with Clients Who Won’t Pay
• Ways In Which An Accountant Can Help
• Online Accounting Software

Tags: Freelance Writing